McDonald's warns that weak sales will hit fourth-quarter profit

(Reuters) - McDonald’s Corp (MCD.N) on Monday reported a steeper-than-expected drop in global sales at established restaurants for November, hurt by weakness in the United States and Asia, and warned that such declines would “significantly pressure” margins this quarter.

A McDonald's restaurant is pictured in Encinitas, California September 9, 2014. REUTERS/Mike Blake

November marked the sixth straight month of worldwide same-restaurant sales declines at McDonald’s, which is battling changing consumer tastes, tough U.S. competition, the after-effects of a supplier scandal in Asia and economic and political turmoil in Europe.

Worldwide sales at restaurants open at least 13 months were down 2.2 percent last month, more than the 1.7 percent decline analysts expected, according to Consensus Metrix.

Shares in McDonald’s fell 3.8 percent to $92.69 in afternoon trading.

Chief Executive Officer Don Thompson, who took the helm in July 2012, has shaken up management and is giving more power to local operators in a bid to improve results.

Despite that, U.S. sales at restaurants open at least 13 months tumbled 4.6 percent in November, the biggest monthly decline since June 2001. Analysts, on average, expected a 1.9 percent fall.

McDonald’s U.S. same-restaurant sales have not increased since October 2013, in part due to competition from smaller and more nimble direct rivals ranging from Wendy’s Co (WEN.O) and Burger King Worldwide Inc BKW.N to In-N-Out Burger and Chick-fil-A.

It is localizing U.S. menus and focusing on customization and fresh ingredients as it also seeks to better compete with popular chains like Chipotle Mexican Grill Inc (CMG.N) and Subway, where diners pick the ingredients that go into their meals.

The stronger U.S. dollar also is expected to reduce fourth-quarter profit by as much as 9 cents per share, McDonald’s said on Monday.

November same-restaurant sales fell 4 percent in the Asia/Pacific, Middle East and Africa (APMEA), which has not yet recovered from a China meat supplier scandal that drove away diners and sent restaurants scrambling for new sources of ingredients for its Chicken McNuggets and Big Macs.

The company said the weak APMEA results could cut McDonald’s profits by as much as 10 cents a share in the current quarter that ends on Dec. 31.

Europe’s same-restaurant sales were down 2 percent in November, hurt by “very weak” results from Russia as well as declines in France and Germany.

McDonald’s said on Monday that all restaurants closed for as long as three months by Russian officials had been reopened.

Reporting by Devika Krishna Kumar in Bengaluru and Lisa Baertlein in Los Angeles; Editing by Saumyadeb Chakrabarty and Chizu Nomiyama